India witnessed a significant decline in wholesale price inflation, which eased to a three-month low of 1.89% in November 2024, according to data released by the Ministry of Commerce and Industry on December 1, 2024. This decline was largely attributed to falling food prices, particularly vegetables, which offset inflationary pressures in other sectors.

Decline in Food Prices

Food inflation showed a marked improvement, falling to 8.63% in November from 13.54% in October. The sharpest decline was recorded in vegetable prices, which dropped by a staggering 28.57% compared to the 63.04% decline witnessed in the previous month. Onion prices also eased, showing a marginal decline of 2.85%, providing relief to consumers.

Deflation in Fuel and Power Prices

The fuel and power category continued its trend of deflation, with prices dropping by 5.83% in November, slightly higher than the 5.79% decrease seen in October. This segment has consistently contributed to reducing the overall inflation rate over recent months.

Manufacturing Sector Inflation

In contrast to the deflationary trends in food and fuel, inflation in manufacturing products rose to 2% in November from 1.5% in October. Key contributors to this rise included increased prices in textiles, machinery, and equipment.

Retail Inflation Trends

Based on the Consumer Price Index (CPI), retail inflation also saw a decline, easing to 5.48% in November, down from a 14-month high of 6.21% in October. This reduction has raised hopes for a potential rate cut by the Reserve Bank of India (RBI) during its upcoming monetary policy review in February 2024.

RBI’s Stance on Interest Rates

Earlier this month, the RBI maintained its repo rate at 6.5%, marking the 11th consecutive time the central bank has kept rates unchanged. The bank’s neutral stance reflects its cautious approach amidst evolving inflation trends and global economic uncertainties. However, with the easing of retail inflation, expectations for a repo rate cut in February 2024 have gained momentum.

Key Takeaways

The Ministry of Commerce and Industry highlighted that the positive inflation trend in November was driven by rising prices in food articles, textiles, machinery, and equipment, even as certain segments like fuel and power witnessed deflation. The moderation in inflationary pressures across key categories is likely to have a positive impact on consumer spending and overall economic stability.

India's improving inflation metrics reflect a combination of government interventions and changing market dynamics. The significant decline in vegetable prices and other food items has provided much-needed relief to households, while the manufacturing sector's inflation signals increased demand and production.

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